Monday, August 22, 2016

A study by Dedrick Asante-Muhammad, Chuck Collins, Joshn
Hoxie and Emmanuel Nieves at the Institute for Policy Studies looks
at the racial wealth divide in the United States and the futility of trying to
get ahead when you're not a white American. The study looks at the
accumulation of wealth in the United States over the past three decades, a
problem that has become particularly prominent since the Great Recession, and
projects what it will look like over the next three decades. This study
is particularly pertinent given the obvious social disparity in the U.S. and
the connection between civil unrest, poverty and race. Let's look at some
of the key observations that the authors of the study have made.

Let's start by looking at
a table that shows how household wealth has changed for Black, Latino and White
households over the period between 1983 and 2013:

As you can see, in 2013,
average White households were by far the wealthiest, having 7.7 times the
household wealth of an average Black household and 6.7 times the household wealth
of an average Hispanic household. As well, over the three decade period
prior to 2013, Black households saw their wealth rise by 26.9 percent compared
to 69 percent for Hispanic households and 84.8 percent for White households.

Other key measures of
prosperity also show Black and Hispanic households falling behind their White
counterparts:

1.) Homeownership:
71 percent of White households own their homes compared to 41 percent of
Black households and 45 percent of Hispanic households.

2.) Unemployment:
White workers have an unemployment rate of 4.4 percent compared to 8.6
percent for Blacks and 5.8 percent for Hispanics.

4.) Use of Alternative
Financial Services including cheque cashers and non-bank entities: 18
percent of White households use these high fee service providers compared to 46
percent of Black households and 40 percent of Latino households.

5.) Retirement Savings:
White households have an average of $130,472 in retirement savings
compared to $19,049 for Black households and $12,329 for Latino households.

With this data in mind,
let's look at what the future holds for all three people groups. Here is
a graph showing what household wealth will look like for Black, Hispanic and
White households over the next three decades (to 2043) if the trends are the
same as they were from 1983 to 2013:

By 2043, the authors'
projections show that White households would experience an average annual
wealth increase of $18,368, bringing their total household wealth to $1.2
million. Black households would see their annual average wealth increase
by $765, bringing their total household wealth to $107,000. Hispanic
households would see their annual average wealth increase by $2,254, bringing
their total household wealth to $165,000. In 2043, average White
household wealth will be 11.2 times the household wealth of an average Black
household (up from 7.7 times between 1983 and 2013) and 7.3 times the household
wealth of an average Hispanic household (up from 6.7 times between 1983 and
2013).

While this growing
racial/ethnic wealth divide is interesting, what is even more interesting is,
that by 2044, the U.S. Census Bureau projects that non-White
households will account for less than half of all U.S. households in what they
term as the "majority-minority" scenario. By 2020, more that
one-half of the nation's children will be part of a minority race or ethnic
group. This means that this very significant and racially-linked wealth
disparity will impact more than half of American households.

The authors then
projected how long it would take for Blacks and Hispanics to overcome this
significant wealth disparity. Assuming that White household wealth
doesn't increase in the future (a highly unlikely scenario), it would take
Latino households 84 years to accumulate the same wealth as White families have
today (i.e. the year 2097). In the case of Black families, the situation
is even worse as shown on this graphic:

Let's close with one more
interesting fact; the list of billionaires on the Forbes 400 list contains only
two African-Americans and five Latinos. These seven families own more
wealth than the entire Black population and one-third of the Latino population
in the United States combined. Now that's inequality at its best/worst!

The massive and growing
ethnic/racial wealth disparity in the United States is increasingly expressing
itself as social and political unrest. The sense of economic helplessness has grown,
particularly since the Great Recession, and millions of non-Whites (and poorer Whites for that matter) are feeling
as though they are being left further and further behind with no hope of
providing for their futures or for the futures of their offspring. The
notable presence of public policies that exacerbate racial and economic
inequality and the lack of will by Washington to change the system mean that
the ethnic/racial wealth gap is becoming more firmly entrenched in society.

3 comments:

The study did not include Asians, however, the authors noted that Asian households have seen their incomes rise steadily and have passed Whites in median income and will pass them soon in median wealth. The problem with the data is that Asians are grouped together as one racial category rather than by ethnicity (i.e. Chinese, Japanese etcetera) so the data is rather suspect.

This study is flawed because of Warren Buffet and Bill Gates. Use Median household income, not average or mean income. I know of very few white households that make over half a million in income. This is a crock.

Subscribe To

About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.